NPRA '08: Europe C2 contract should go monthly

30 March 2008 18:07  [Source: ICIS news]

SAN ANTONIO, Texas (ICIS news)--The European ethylene (C2) industry should again attempt a move to a monthly contract mechanism which would better reflect upstream volatility, a Mediterranean olefins producer said on Sunday.

 

“We should move to a monthly system, then after a set period of maybe one year, review the process,” he said on the sidelines of the 33rd National Petrochemical & Refiners Association (NPRA) meeting.

 

The vast majority of European ethylene is priced on a quarterly basis. The move away from this system, seen as undynamic and past its prime by several industry players, has long been mooted.

 

The producer said that in this era of historical highs on crude and naphtha, and increased volatility, the quarterly system did not reflect the cost pressures faced by ethylene producers.

 

Two attempts to move away from the quarterly system have been tried in the past.

 

In 2006, the bi-monthly contract came into play but after two years this has also faltered through lack of industry-wide support. Three participants dropped out last year leaving only one seller and a handful of customers involved.

 

In 2005, a monthly contract was established, the monthly agreed price (MAP) - but this found little support from the industry largely because it was agreed between three integrated players and is now not publicly reported.

 

Ethylene consumers, primarily polyolefins producers, had not been keen to follow a monthly system, citing unwanted increased volatility on polyethylene (PE).

 

It remained unclear whether they would be willing to try and see this time if the much talked benefits of a monthly system could be shared downstream.

 

Second-quarter ethylene contracts were recently agreed up €15/tonne at €1,038/tonne FD (free delivered) NWE (northwest Europe), according to global chemical market intelligence service ICIS pricing.

 

($1 = €0.63)

 

For more on ethylene please visit ICIS chemical intelligence 

By: Nel Weddle
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly